Investor Protections

One of the significant risks for angel investors is that follow-on capital could have aggressive terms that damage the upside potential for the earlier investors. However, this risk to VIN investors is greatly mitigated compared to normal angel investments. The risk mitigation is provided through several important factors:

  • By co-investing in the same class of stock with larger investors such as VIC, investors reduce the risk of having to accept future rounds on poor terms. The larger investors can help protect the interests of all investors in the given class of stock.
  • One or more dedicated board seats are provided for the class of stock in which the VIN members are investing. This ensures appropriate representation for all decisions that might affect value of VIN member shares.
  • First right of refusal is offered on new rounds to protect ownership stake. This allows VIN members to maintain their ownership percentage in future financings of the company.
  • Down-round protection is included to provide protection against any future down investment rounds at a lower share price. This protects VIN members from future investors receiving better valuations than VIN members received due to unforeseen problems that may have arisen in the interim. In this case, VIN members would be issued additional shares to reflect the new (reduced) valuation.
  • Investing as part of VIC ecosystem greatly mitigates risk of company failure from poor due diligence, cash starvation, and the other most common reasons for startup failure. There are no poorly vetted companies offered to VIN members. And while there is some risk in each individual investment, the valuation always reflects the reward-to-risk potential as assessed by highly experienced and successful early stage investors. Additionally, the usual risk in these types of companies is greatly mitigated through the cost efficient VIC ecosystem and business model. Finally, because VIN allows small investment increments, the ability to further mitigate risk through diversity of invested companies is greatly enhanced.